Five ways banks rip you off

Careless consumers share the blame for forking over $24 billion to banks in overdraft fees last year, but, as the NY Times points out, bank policies encourage these penalties.

(If you have over drafted with Wachovia/Wells Fargo, call customer service and ask them to waive your fees.)

Since 45% of U.S. banks rely on these funds to stay profitable, it’s little surprise that they rig their banking practices to maximize the amount of overdrafts incurred.

Here are five rip-off techniques:

  1. Rearranging transactions. Let’s say you have $100 in your account, and you make five debit card purchases, in this order: $1, $1, $1, $1 and $99. Instead of processing these transactions in the order in which they were made, the bank will process the largest first. In this example, that means you would be hit with three overdraft penalties instead of one.
  2. Depositing slowly, charging quickly. If your account is low on funds, banks are more likely to delay processing your deposits. Further, banks will process purchases faster if it will result in an overdraft penalty.
  3. Charging additional fees. At some banks, if you don’t pay the overdraft fees within a certain time frame, they will tack on additional fees.
  4. Allowing debit card purchases. Banks allow customers to make purchases on debit cards with insufficient funds, instead of denying the transaction or notifying the buyer before finalizing the order.
  5. Not instituting maximums. Few banks will limit the amount of fees you can be charged in a single day. If you don’t realize you’ve overdrawn, it can quickly snowball – especially if you make several purchases (even of a few dollars) during one day. To boot, many of the penalty ceilings don’t kick in until you’ve already lost hundreds of dollars.

6 Comments

  1. Mrs. S

    This is what government should be governing.

  2. Clint

    Mrs. S,

    Absolutely.

    Instead, the government appears to be owned and controlled by these financial institutions.

  3. They do the rearrangement of fees because if it’s a Mortgage payment they want to make sure the biggest comes first and not the smallest because it is of perhaps bigger importance. This is the excuse they give you and is not a service I request.

    It’s also true that there isn’t a limit to the amount of fees you can occur in one day, a HUGE abuse of consumers.

    Also true, from my own experience with Bank of America. They will allow all purchases up to -$30 dollars! Basically a credit card with an INSANE next business day interest rate, as a free ‘service’. Customer service is also ill-equip to help you in this matter if you wish to remove it.

    Being so big, these large banks don’t seem to have to please their customers because they all work together. With so many branches it’s like trying to find a local cafe compared to finding a Starbucks.

  4. It’s also true that they deposit all checks slowly and process digital transactions far more quickly. It’s like they are dinosaurs with power tools. I don’t get it either.

  5. Chris

    This is the result of banks morphing from very boring but reliable businesses into profit generating powerhouses. Government, meanwhile, has called off the regulators that kept banking a little more moral.

  6. bubba

    only the dumb or apathetic get charges like these. Just be responsible and care about your finances and you won’t be charged.

    Anyone who does personal banking with BOA is simply ignorant.